The backdrop should be reassuring for many investors: A lively bull market, pro-business policies promised by the Trump administration and a Federal Reserve close to pulling off a soft landing. However, Wall Street’s biggest names aren’t sounding so bullish for the year ahead. Convening at an alternative investments conference in Miami this week, hedge fund titans and industry pros collectively struck a cautious tone about elevated market valuations and potentially negative impacts from President Donald Trump’s protectionist policies. Point72′s Steve Cohen believes tariffs and an immigration crackdown will stoke inflationary pressures and hinder consumer spending. The family office head and Mets owner therefore expects the broader market to get bumpy particularly in the second half of the year. “I don’t think that’s a great backdrop in 2025,” Cohen said at the iConnections Global Alts conference dubbed Hedge Fund Week. “I would expect the markets to top over the next couple months, if it hasn’t already topped already, and I would expect the second half to be a little tougher.” The S & P 500 just scored a second consecutive annual gain above 20%, and the two-year gain of 53% is the best since the nearly 66% rally in 1997 and 1998. The equity benchmark is up 3% year to date, but investors just got a taste of violent volatility this week. An artificial intelligence competitor out of China caused a massive sell-off in Nvidia and other megacap tech names earlier this week. Bridgewater’s co-chief investment officer Karen Karniol-Tambour said she holds a neutral view on the markets right now because of the duality of higher-than-expected growth and hotter-than-expected inflation. “It’s not a great time to really lean in and take a ton of risk,” she said. “You are, on the margin, more likely to get a strong growth and stronger-than-expected inflation environment, but that could change quickly because with the amount of policy uncertainty you have, it’s not hard to imagine one policy change really tilting us in terms of the macro environment.” Karniol-Tambour, who helps manage the world’s biggest hedge fund, added that the biggest opportunity she sees across public markets right now is rebuilding the fixed income allocations. .SPX 1Y mountain S & P 500 Oaktree Capital’s co-founder Howard Marks, who’s already on bubble watch , told attendees that the Nvidia episode this week is indicative of “the pervasiveness of psychology and the irrationality of the markets in the short run.” The respected value investor, who famously foresaw the dot-com bubble, said high-yield credit could serve as an appealing alternative to equities, given that most sell-side strategists only project measly returns this year in the boarder market. “If you can get low single-digit returns from the S & P 500 with great uncertainty and 7.3% from high-yield bonds contractually, isn’t it better?,” Marks said. “Everybody should look at their holdings and try to make sure that the things they own, they own based on strong and improving fundamentals.”
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